'China snubbing Zim'

HARARE - Insurance giant, Old Mutual, has become the latest local prominent voice to observe that Zimbabwe’s supposed all-weather friend, China, is treading carefully about investing more in Zimbabwe, due to the country’s poor property rights record.

Old Mutual’s observations came in the wake of China injecting nearly $20 billion into Sub-Saharan Africa’s economy in 2015 alone, with Zimbabwe receiving only $500 million of that investment — translating to 2,6 percent of the Asian giant’s total investment in the region, according to World Bank data.

“In order for Zimbabwe to improve its economic fortunes, a number of excessive legislation governing business operations and red tape need to be simplified.

“The country has had a bad reputation ... and will need to seriously overturn this deficiency if it hopes to attract the sort of investment that its neighbours have been able to attract,” Old Mutual said in its latest quarterly review.

The prognosis will come as a major blow to President Robert Mugabe and his Zanu PF government, who have been pinning their hopes on China helping Zimbabwe to revive its dying economy.

The International Monetary Fund expects the local economy to grow by a paltry 1,5 percent this year due to a deadly combination of mismanagement, policy inadequacies and drought.

Although China was initially very enthusiastic about funding Zimbabwe’s economic blueprint, ZimAsset, the high-profile “mega deals” that it signed two years ago have failed to materialise thus far, with Beijing now seemingly more focused on stemming its own economic challenges.

A senior government official who spoke to the Daily News recently said while the Chinese were still very keen on doing business with Zimbabwe it was also wary of the deadly factional and succession wars devouring Zanu PF.

“If you look closely you will see that several feasibility studies have been started between China and Zimbabwe, including studies into coal exploration and a 600MW thermal station in Sibugwe, as well as the dualisation of the Beitbridge-Harare, Harare-Nyamapanda, Harare-Chirundu and Mutare-Harare highways.

“But the Chinese borne of contention at the moment is whether their investments would be secure after the old man is gone, considering that there is no clear succession plan in place. Until we sort that issue, it would be difficult for these good projects to take off,” the official said.

Other experts say a slowdown in China’s growth rates, as well as scepticism over whether Zimbabwe can repay previous loans, has crept into the finalisation of the mega deals.

On its part, Old mutual noted that the Zanu PF government must do more to attract foreign direct investment in the manufacturing sector, to allow the country to add value to its predominately raw product exports.

“Foreign investors require comfort in the security of their investment and policy consistency in the environment in which they operate. Zimbabwe would benefit by eradicating corruption, improving its ease of doing business requirements, policy consistency and respecting property rights.

“Of growing concern has been the growth in public sector debt through the continued issuance of treasury bills by government. In the absence of a public auction system, the exact amount of the debt attributed to treasury instruments alone is difficult to ascertain,” it said. Information at hand shows that government’s net debt ballooned from $0,5 billion in January 2015 to $1,2 billion by August 2015 against shrinking tax revenue collections.

Economic experts said this has increased concerns over the default risk of these treasury instruments and they are currently being assumed by banks at significant discounts from parties holding these instruments that are desperate for liquidity.

“In the absence of foreign direct investment or debt re-negotiations from external financiers these instruments are most likely to be rolled over by government to avoid default on the more significant maturities,” Old Mutual added.

Comments (6)

all the distress calls and drumbeats are falling on deaf ears while the red flags are viewed as cheers of the 'empowered' towards the 'esteemed' royalty that has delivered its subjects from bondage. no hot head will ever wake up from the deep slumber to answer to a recommendation from a british conglomerate that is bent on subordinating our soveregnity. all such opinion is viewed as imperialistically suggestive with a neocolonialist agenda to continue enslaving the 'masses.' so old mutual kip yo opinion and i will kip my zim!

SaManyika Chaiye - 15 June 2016

If Mugabe and Company (Pvt) Ltd thought the Chinese are not clever you are mistaken, big time. Chinese are hard working people who have come a long way in building their economy from subsistence farming to an industrial hub. They were never going to just give away funds to idots like Bob and Company. It takes decades of hard work to build a strong economy and some silly dudes think China would just donate money to lazy Zim politicians!! Well done China for being very careful when considering investing in a lawless country like Zimbabwe. China has close to 1.5billion people to look after and will not be bothered about some minute nation in Zimbabwe. Now Bob is trying the Japanese but it is not going to work. Japanese are also workaholics who will not give away funds on a silver platter!!!!!!

gamuchirayi - 15 June 2016

...meanwhile, a whole government delegation led by Industry and Commerce Ministry went to Japan to sign "mega deal" around used ex-Japanese vehicles. Cry my beloved country.

XG - 15 June 2016

No. Its not about property rights. Chinese investments can always be ring fenced, seeing that they are supposed to be friends with ZANU PF. Its about the high political risk of investing in a country who political future is as clear as mud. Nobody will put in $10 billion or so in a country led by a repressive 92 year old, who can die anytime without a clear succession plan. What if the opposition takes over and closes the Chines out. Shot of war, how will the Chinese recover their investment?

Kwakubus'uMambo no Mzilikazi - 15 June 2016

i have seen quite a number of youngsters (including girls) being waylaid by what they religiously confessed to be their 'all weather friends.' it drills down to the bone marrow to see a whole gvt succumbing to such childish trickery in broad daylight. it meks one shudder to see a gvt that throng a sangoma who said she can draw purified diesel from a chinhoyi termite mound! i regret to be in this land where one set of foreigners is chased away and get replaced by another, all for the selfish desire to rob the indigenous in the name of 'mega deals.'

SaManyika Chaiye - 15 June 2016

Why should China or any other country for that matter ever consider investing here given the background to our debt burden and the manner in which we have managed the country and its resources? To now criticize China after all what she has done for us is the worst thing we could ever do?

Mbewa - 16 June 2016

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